(The following statement was released by the rating agency) OVERVIEW
-- We raised our rating on the class D notes from Halcyon Structured Asset Management Long Secured/Short Unsecured 2007-1 Ltd., a U.S. CLO transaction.
-- We affirmed our ratings on the class A-1, A-2, B, and C notes from the same transaction.
-- The upgrade reflects a marginal increase in the balance of the total collateral backing the rated notes, as well as improved credit quality of the underlying collateral since our January 2011 rating actions.
NEW YORK (Standard & Poor's) Oct. 1, 2012--Standard & Poor's Ratings Services today raised its rating on the class D notes from Halcyon Structured Asset Management Long Secured/Short Unsecured 2007-1 Ltd., a U.S. collateralized loan obligation (CLO) managed by Halcyon Loan Investors L.P. In addition, we affirmed our ratings on the class A-1, A-2, B, and C notes (see list).
The upgrades reflect a marginal increase in the balance of the total collateral backing the rated notes, and improvement in the credit quality of the underlying assets since our January 2011 rating actions.
The amount of 'CCC' rated collateral held in the transaction's asset portfolio declined since the time of our last rating action. According to the Sept. 1, 2012, trustee report, the transaction held $36.48 million in 'CCC' rated collateral, down from $56.31 million noted in the December 2010 trustee report, which we used for our January 2011 rating actions.
Also, the collateral balance--designated by a combination of principal proceeds and total par value of the collateral pool--backing the rated liabilities has increased $2.34 million since December 2010. The increased collateral balance improved the credit support available to the rated notes, and potentially increases the available interest proceeds that the underlying collateral generates.
Over the same time period, the transaction's class A/B, C, and D overcollateralization ratio tests and weighted average spread have also improved.
Our review of this transaction included a cash flow analysis, based on the portfolio and transaction as reflected in the aforementioned trustee report, to estimate future performance. In line with our criteria, our cash flow scenarios applied forward-looking assumptions on the expected timing and pattern of defaults, and recoveries upon default, under various interest rate and macroeconomic scenarios. In addition, our analysis considered the transaction's ability to pay timely interest and/or ultimate principal to each of the rated tranches. The results of the cash flow analysis demonstrated, in our view, that all of the rated outstanding classes have adequate credit enhancement available at the rating levels associated with this rating action.
Standard & Poor's will continue to review whether, in its view, the ratings assigned to the notes remain consistent with the credit enhancement available to support them and take rating actions as it deems necessary.
STANDARD & POOR'S 17G-7 DISCLOSURE REPORT
SEC Rule 17g-7 requires an NRSRO, for any report accompanying a credit rating relating to an asset-backed security as defined in the Rule, to include a description of the representations, warranties and enforcement mechanisms available to investors and a description of how they differ from the representations, warranties and enforcement mechanisms in issuances of similar securities. The Rule applies to in-scope securities initially rated (including preliminary ratings) on or after Sept. 26, 2011.
If applicable, the Standard & Poor's 17g-7 Disclosure Report included in this credit rating report is available at
RELATED CRITERIA AND RESEARCH
-- Global Structured Finance Scenario And Sensitivity Analysis: The Effects Of The Top Five Macroeconomic Factors, Nov. 4, 2011
-- Principles Of Credit Ratings, Feb. 16, 2011
-- Update To Global Methodologies And Assumptions For Corporate Cash Flow And Synthetic CDOs, Sept. 17, 2009
-- Application of Supplemental Tests For Rating Global Corporate Cash Flow And Synthetic CDOs, Sept. 17, 2009
-- General Criteria: Understanding Standard & Poor's Rating Definitions, June 3, 2009
-- CDO Spotlight: General Cash Flow Analytics For CDO Securitizations, Aug. 25, 2004
RATING ACTION
Halcyon Structured Asset Management Long Secured/Short Unsecured 2007-1 Ltd.
Rating Class To From D BBB- (sf) BB+ (sf) RATINGS AFFIRMED
Halcyon Structured Asset Management Long Secured/Short Unsecured 2007-1 Ltd.
Class Rating A-1 AAA (sf) A-2 AAA (sf) B AA+ (sf) C A+ (sf) (New York Ratings Team)
((e-mail: pam.niimi@thomsonreuters.com; Reuters Messaging: pam.niimi.reuters.com@reuters.net; Tel:1-646-223-6330;))